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Bharat Bond ETF

Bharat Bond ETF

The Cabinet Committee on Economic Affairs on 4th December 2019 approved the creation of India’s first exchange-traded Bharat Bond Exchange Traded Fund (ETF), a move aimed at deepening the corporate bond market and reducing the cost of borrowing in India.

Key Points:

  • Bharat Bond ETF is awaited to create an additional source of funding for Central Public Financial Institutions (CPFIs), Central Public Sector Undertakings (CPSUs), Central Public Sector Enterprises (CPSEs), and other government organisations.
  • The Bharat Bond ETF will have a fixed maturity of 3 and 10 years. 
  • This would provide retail investors easy and low-cost access to bond markets, with a smaller amount as low as Rs 1,000.

About Bharat Bond ETF:

  • Bharat Bond ETF will act as a basket of bonds that are issued by the central public sector enterprises/undertakings or any other government organisation bonds. (Initially, all AAA-rated bonds).
  • It will invest in a portfolio of bonds of state-run companies and other government entities.
  • The government has so far allowed only equity ETFs, and the government raised nearly Rs 14,400 crore through ETFs in the 2019-20 fiscal year. Retirement fund body Employees Provident Fund (EPFO), has invested about ₹87000 crores in ETFs.
  • Bond ETF will provide safety, i.e., underlying bonds are issued by CPSEs, and other government-owned entities, liquidity, i.e., tradability on exchange and predictable tax-efficient returns.

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